Home ›› 26 Oct 2022 ›› Stock
Hong Kong and Shanghai stocks saw big swings Tuesday following the previous day’s rout after Xi Jinping tightened his grip on power in China, while other markets fought to maintain a rally fuelled by hopes of a less hawkish Federal Reserve.
Optimism about upcoming corporate earnings was providing some support, with Wall Street chalking up another strong day ahead of reports this week from big-name firms including Apple, Amazon and Microsoft.
Investors were keeping a wary eye on developments in China after Xi at the weekend was handed another five year term as leader and gave top jobs to a number of loyalists who back his strict zero-Covid strategy.
The policy of lockdowns and other strict measures has been a major cause of the country’s economic woes and the prospect of more upheaval has sent chills through trading floors.
The uncertainty resulted in a drop of more than six per cent in Hong Kong on Monday, with tech firms -- which have been hardest hit by Xi’s crackdown on a range of private-sector companies -- taking the brunt of the pain. The selling spread to New York later in the day, with the Nasdaq Golden Dragon China Index of 65 Chinese stocks diving 14 per cent -- its biggest fall on record -- wiping more than $90 billion off their market value.
Any hopes for a big bounce from bargain-buying on Tuesday were short-lived with wild fluctuations in the city seeing the Hang Seng Index swing from gains to losses in a three per cent band before finishing down 0.1 per cent.
Shanghai struggled to get out of negative territory and ended slightly lower, while the onshore yuan sank to its weakest level since 2007 and the offshore yuan hit its lowest level since trading in it started 12 years ago. We are certainly staying away from the Chinese market right now because the political scene is not favourable, Laila Pence, of Pence Wealth Management, told Bloomberg TV.
There’s a lot less risk in the US and just as much upside. The gloomy mood in China cast a shadow over an largely positive start to the week elsewhere as investors were cheered by a report suggesting the Fed could discuss at next week’s policy meeting the possibility of slowing down its pace of interest rate hikes.
